NCLT has asked lenders of Siva Industries to clarify the rationale for accepting a one-time settlement by the company’s former promoter C Sivasankaran since the recovery is less than 7 per cent of the overall debt.
The lenders have filed an application under Section 12a of the IBC which allows former promoters to take back control of the company under a OTS.
‘Bad precedent’
According to sources, lenders will recover only 6.5 per cent of the total debt of ₹4,863 crore. Under the offer, approved by the lenders, Sivasankaran will pay only ₹5 crore upfront and the balance within 180 days of approval.
Experts felt that allowing defaulting promoters to take back control of Siva Industries through settlement at such low value, will set a bad precedent.
Siva Industries was admitted to Corporate Insolvency Resolution Process on July 5, 2019. But CoC in its meeting held on April 1 approved the OTS and the Resolution Professional was authorised by IDBI Bank to file an application under Sec. 12A of IBC for withdrawal application. The Court will hear the matter again on June 24.